The international money transfer industry is huge. Consider this – migrants living in different parts of the world sent over U.S. $625 billion to their home countries in 2017. This was seven percent more than the corresponding figure for 2016. With instances of people travelling across geographical boundaries for work and pleasure only increasing, it seems unlikely that the global remittance trend is going to change any time soon.
Until 15 to 20 years ago, the international money transfer industry was predominantly dominated by large banks and a handful of high-street forex brokers. However, that began to change with the arrival of some FinTech-based overseas money transfer companies. Now, people get scores of FinTech alternatives from which to choose, no matter where they live.
Is FinTech Here to Stay?
While people who wish to send money overseas are now spoilt for choices, leading FinTech companies continue to grow from strength to strength. Take into account the case of UK-based TransferWise. This overseas money transfer company is the first unicorn – valued at more than U.S. $1 billion – from this field, and it achieved profitability within six years of launching operations. From specializing in peer-to-peer (P2P) payments, the company is now making inboards in the customer-to-customer (C2C) sector.
Some of the leading players have managed to receive financial backing from venture capitalists. Examples include:
- WorldRemit has raised more than U.S. $407.7 million through multiple rounds funding
- TransferWise has raised over $772.7 million
- InstaReM has raised around $59 million
Benefits That FinTech Brings to the Table
With increased options from which to choose, people stand to benefit in different ways. For starters, they no longer need to depend on banks when they wish to make cross-border fund transfers.
Better Exchange Rates
While big banks have had access to interbank rates for long, they end up adding noticeable markups when carrying out cross border transfers for individuals and small to mid-sized businesses. Now, even FinTech companies from this realm have access to interbank rates because they deal in large volumes of currency exchange. Only, unlike most banks, there are some FinTech companies that process transfers using interbank rates.
Some FinTech companies such as XE Money Transfer, OFX, WorldFirst, Currencies Direct, and TorFX offer hedging tools in the form of market orders and forward contracts. These give customers the ability to make the most of the volatile forex market.
Lower Transfer Fees
Another reason banks continue to lose out on their share of the international remittance pie is their charging significantly high transfer fees. FinTech companies, on the other hand, have successfully kept overheads down, and manage to charge little to no fees. Depending on where you live, you may use the services of companies such as OFX, TorFX, or XE Money Transfer to carry out fee-free personal transfers.
Quicker Processing Times
With the arrival of FinTech companies, there has been a noticeable improvement in turnaround time. Now, if you wish to send money to an agent location and carry out your transfer during business hours, it may process almost immediately. Transfers to overseas bank accounts, depending on the company you select and the currencies involved, may process in one to five business days. What also helps is that some companies process express transfers by charging nominal fees.
Different Ways to Pay
Gone are the days when you had to pay for an overseas bank transfer using cash or a bank account transfer. Depending on the company you work with and the country of your residence, some of your other options may include debit cards, credit cards, ACH, Apple Pay, Google Pay, SOFORT, iDEAL, and POLi.
Multiple Transfer Methods
People now have the ability to initiate their transfers in person, online, or over the phone. In addition, while they can send money directly to recipients’ bank accounts, they can also get recipients to collect transferred funds as cash from physical locations. Some companies also give you the ability to top off mobile wallets and mobile airtime of different service providers from a range of countries.
While companies such as MoneyGram and Western Union were at the forefront of cash transfers, newer companies are making their presence felt in this segment as well. Examples in case include WorldRemit, Azimo, and Ria. Depending on the company you select, you might also be able to schedule transfers.
While some banks offer multicurrency accounts, they often come with steep fees. By entering this realm, FinTech overseas money transfer companies are adding to increased cost effectiveness and better functionality. Companies such as WorldFirst, OFX, and TransferWise give their customers access to receiving bank accounts in multiple currencies without charging any account keeping fees.
The evolution of the international money transfer industry over the last two decades is plain to see, and this is mainly because of the arrival of FinTech companies. Banks that are adapting to changing times might stay in the race, although ones that don’t may well say goodbye to their overseas money transfer customers.